by The purpose of the sales mix and quantity variances is to show how much of the sales volume variance is due to a change in the mix of the products sold (sales mix variance) and how much is due to a change in the quantity of the products sold (sales quantity variance).
Sales Mix Variance
The sales mix variance shows how much of the sales volume variance was due to a difference between the actual sales mix and the budgeted sales mix.
The variance is calculated by taking the difference between the actual sales volume and the actual sales volume at the budgeted mix and multiplying this by the budgeted price to give a monetary amount.
The sales mix variance formula is as follows.
Sales mix variance = (Actual sales volume – Actual sales volume at budgeted mix) x Budgeted price
It should be noted that the term standard is often used when referring to unit prices, so budgeted price in the above formula could be replaced with the term standard price.
If actual volume is greater than the actual volume at budgeted mix the sales mix formula gives a positive result and the sales mix variance is a favorable variance. If actual volume is lower than actual volume at budgeted mix the formula will give a negative result and the sales mix variance is said to be unfavorable.
Sales Quantity Variance
The sales quantity variance shows how much of the sales volume variance was due to a difference between the actual volume sold at the budgeted mix and the budgeted volume.
The variance is calculated by taking the difference between the actual sales volume at the budgeted mix and the budgeted sales volume and multiplying this by the budgeted price to give a monetary amount.
The sales quantity variance formula is as follows.
Sales quantity variance = (Actual sales volume at budgeted mix – Budgeted sales volume) x Budgeted price
If the actual volume at budgeted mix is greater than the budgeted volume the sales quantity variance formula gives a positive result and the sales quantity variance is a favorable variance. If actual volume at budgeted sales mix is lower than budgeted volume the formula will give a negative result and the sales quantity variance is said to be unfavorable.
Summing the Sales Mix and Quantity Variances
The sales volume variance is based on the difference between the actual volume of sales and the budgeted volume of sales multiplied by the budgeted unit price.
Sales volume variance = (A – B) x BP
Where A is the actual sales volume, B is the budgeted sales volume and BP is the budgeted unit price.
Using this sales volume variance formula we can now show that the sales volume variance is equal to the sum of the sales mix and quantity variances.
If the term actual sales at budgeted mix (ABM) as discussed above is added and subtracted from this formula we get the following.
Sales volume variance = (A – B) x BP
Sales volume variance = (A – ABM + ABM – B) x BP
Sales volume variance = (A – ABM) x BP + (ABM – B) x BP
Sales volume variance = Sales mix variance + Sales quantity variance
Sales Mix and Quantity Variances Using Contribution and Profit
The above analysis uses the budgeted price per unit of the product to calculate the monetary value of the sales mix and quantity variances. As an alternative for absorption costing the budgeted profit per unit or for marginal costing the budgeted contribution per unit can be substituted for the budgeted price in the above formulas.
